Depression or Prosperity?

...This time, because of the tremendous volume of pent-up war savings and our increased ability to handle economic forces, the catching-up prosperity is likely to last somewhat longer than after World War I. But even if a depression should develop as rapidly as it did after t** last war, mass unemployment is unlikely before the second half of the 1960's...

...Still in August, some economists predicted mass unemployment of from 4,000,000 to 8,000,000 in September and October, Actually, unemployment was less than 2,000,000 in September and—apart from the possibility of the disastrous effect of the pending labor conflicts—is unlikely to rise much above 3,000,000 in October...

...The argument would be convincing if all the savings were held by workers, more specifically by the workers who are directly threatened by unemployment...

...Shiee the gains may be greatest in the last three yeara of the decide, however, ths output per man-hour wil hardly ad-more than 15 percent by 1947...

...Fortune (October 1945) sets liquid savings of individuals, Including business reserves, at $225,000,000,000...

...Agriculture may absorb 8,500,000 workers (as compared with 9,200,000 in 1940...

...Their purpose is rather to divorce the problem of economic perspectives from current dashes of political and social opinions...

...Will production and work opportunities dwindle because of insufficient outlets, or will there be a tendency toward continuous expansion, rising production, and rising consumption T Production creates current purchasing power precisely as purchasing power creates production and jobs...

...There has always been a spell of 10 to 12 years between the end of hostilities and the col-•*P»e of postwar expansion...

...Some of ths following figures differ slightly from those I used in sn srticle which sppeared in the Washington Post on August 30...

...The experience of all major wars in the past suggests a definite rhythm of economic events...

...The hat-run trend and experience after past sets, which usually tended to speed up technological progress, suggest that between 1940 and 1950 the output per ¦an-bour may rise from 20 to 30 percent...

...The comparable figure in 1940 was nearly 28,000,000, and it would have increased to nearly 31,000,000 as the result of the growth in population if the general pattern of production and employment had remained in 1947 as in 1940...

...There oven seems to be some correlation between the degree of their pessimism and their posjtion on the left...

...The hypothetical figure for full employment for 1947 is o4,500,000 jobs...

...However, there is no necessary equilibrium between the capacity of a nation to consume and its capacity to produce...

...Each estimator had occasion to present, in advance, his view of what the situation in the labor market was likely to be a month, two months, or three months after V-E day...

...Both in this country and abroad, each major war has been followed by a major depression, but never immediately sfter the outbreak of peace...

...domestic service, 2,000,000 (in 1940 2,500,000...

...Add $2,000,000,000 or $3,000,000,000 for surplus of exports over imports, international relief, and foreign loans...

...The President's Full Employment measure is represented as the work of revolutionists...

...Add cspitsl outlays for modernisation of the obsolete transportation and communication system, spent out of business reserves put aside luring the war...

...They wilt be more like those of the 1920'«: the imminent danger will be the inflationary ovtrexpansion rather than mass-unemployment...

...confusion, with strong inflationary pressure and loss...

...that there will be no free-for-all -ight between labor and management, in spite of local conflicts and strikes...

...The main difference between the present situation and that after the first World War is that Hie small volume of inflation during this war gives us a good chance to avoid the violent recession that marked the collapse of inflated prices in 1920...

...The premise of full employment immediately after reconversion Is, therefore, that there will be 8,600,000 more jobs thsn in 1940, or that civilian employment will increase 18 percent To describe the goal in 1947 in terms of production and consumption, we should take account of chances in the work-week, in productivity of labor, and in disposition of the national product...

...To sum up, the economic problems we will lace in the coming decade are in almost every respect different from those of the 1930's...

...that the labor force will be adjusted gradually to changing conditions, in spite of the absence of clear plans...

...t non-agricultural pursuits, 5,500,000 (in 1940, 4,700,000...

...Actually, no fear of unemployment can stop the flow of war ssvings bsck into circulstion...

...A part of the riae, perhaps 5 percent °' the total national output of 1947 (or 'percent of the output in 1940), will be •hsorbed by military needs: maintenance 11 the Navy, Army, and Air Force, do-**h)pmfnt of military and naval bases •itrieas, hospitalisation of wounded ?eterans, pensions to the disabled and "* like...

...Assuming that 1947 is such a year, average employment would approach 66^00,000...

...The reel dsnger ef a depression similsr to that of the 1930's will come much later...

...This would leave 34,000,000 tmployed workers lor private nonrv^ricultural eBtab...

...A boom in housing construction, including production of building materials, would provide about 2,000,000 additional jobs...

...In fact, during a considerable period after the war, current purchasing power, supported by the factors mentioned above, wiil suffice to buy up the current output of goods* and service?, stimulate their production on a steadily widening scale, and justify a steady flow of investment...

...It may serve also as warning to thoae who uncritically use the depression theory as an argument for what rsj any circumstance* would be a sensible and decent economic and labor policy...

...A good and just cause may be lost when weak and wrong arguments are used to defend it...

...If 2,000,000 men are still In military service, the number of civilian jobs should average 64,600,000, as against 46,000,000 In 1940...

...Some people are Inclined to dismiss the reference to war savings with this argument: because of the fear of unemployment, consumers will not spend their savings...

...FlRST of all, let us remember the lessons of history...

...After these needs are met, the ?""duct available for civilian use in 1947 ¦ay exceed the 1940 pattern by from 20 w 85 percent, in round numbers...

...CAMPAIGN OF MISREPRESENTATION AGAINST FULL EMPLOYMENT L> JUKI...

...economic expansion stimulated by deferred demand and pent-up purchasing power follows on the heels of reconversion, this "catching-up" expansion ends in collapse, a major depression and mass unemployment...

...Add the backlog in public work-, the expansion of educational and health services and ths general spending spree which hss been clearly discernible since V-.' Dsy...

...If the sversge work-week in 1947 is, say tee soars less then in 1940, an 18 per-*mt growth in the number of man-years vflj mean only a 14 percent increase in the number of man-hours...

...Labor leaders are particularly eager to persuade the nation that it is headed toward a terrible depression...

...ThE preceding projection differs sharply from estimates released recently to the press by various governmental and private agencies, but the reader can easily check the conflicting theories by their record...

...What is the chance that we will reach the desired level of production and—apart from occasional fluctuations In business conditions—remain on this level...

...The question whether there will be enough jobs for all is answered by analysis of the probable demand for labor by various industries...

...Ths crucial point, however, is that if, in addition to current earnings (after deduction of taxes and usual savings), consumers spend as much as $3,000,000,-000 or $6,000,000,000 a year from their reserves, current purchasing power will hi more than sufficient U buy up the current output in goods and servicss, the demsnd will be larger than ths supply, expansive forces will prevail and the i whole situation will be inflationary—ss 'after all major wars in the past...

...Projections which I published in 1943 indicated that net war savings might total $215,000,000,000 by the midsummer of 1945...

...What forces are likely to prevail in the economic system in the coming years...

...Whatever the exact amount of war ssvings, they sre not all equally liquid and only a small part may be spent immediately after the end of the war...

...the auspices of the Comm'ltee for Constitutional Government wea'thy contributors all over the country are being put on the spot to finance a scandalous campaign againat the Full Km ployment Bill...

...an era of prosperity...

...Our future is bright if the nation follows my recommendations," contends the optimist...

...It is, however, defensible to assume that postwar economic problems will be handled with the understanding and the degree of success we attained during the war...

...M«f)osj or Deflation...

...It becomes, on the other hand, a logical device for improving our legislative procedures in economic matters if we 'admit both possibilities—prosperity •r depression in postwar America...

...The rise from 1940 to 1947 In ths number of man hours ef work is not necessarily proportionate to the rise in man-years...

...The main differences are In the revised estimates of the armed forces and of the average number of hours In a work week.] Our normal labor force (without war emergency workers) would average at that time 68,600,000...

...Allowing 1,000,000 for military losses (killed and disabled) and for former servicemen returning to schools and colleges, the actus) supply of labor will probsbly be closer to 59,000,000...

...Because of population growth J*d war marriages, the number of hnuse-In the nation will increase about '"percent from 1940 to 1947...

...Moreover, these practical considerations have little to do with the question sf whether America is facing a great depression dr...

...On the other hand, after the described level of production and consumption is reached, there will be a fair chance of maintaining it...

...All of tin prosperous and virtuous citizens, al legedly 80 percent of Americans, are warned that the ne'er-do-wells, said in constitute only 20 percent, will rob triern if this nefarious bill is passed...

...Full-employment legislation will appear to be a vehicle for deficit spending if it is supported by the argument that 10 or 20,000,000 workers will he out of work by the end of the reconversion...

...Let us evaluate the goal of prosperity for, say, the year 1947, the first normal post-reconversion year and sea if that goal is within our reach...

...The third report of the Director of War Mobilization and Reconversion (July 1, 1945) estimates our liquid assets at $230,000,000,000 (including prewar savings...

...This is the price the nation will pay for not listening to my warnings," de-darts the pessimist...

...The output per household, therefore, will rise only 10 to 15 percent...

...This would promise that there will be no runaway inflation, in spite of an occasional rise in prices for various commodities...

...Whether sn "educational" campaign carried on in this curiously old-fashioned way will have any effect on Congress remains to be seen...

...It should be kept in mind that these ••ores refer to the total volume of pro-!**ion> not the share per capita or per ""•••hold...

...At least an additional million workers will be needed to produce capital goods, and an equal number in the export industries, expanding domestic trade, utilities, and service industries...

...shments...

...Under certain conditions, the lack of sufficient outlets causes inventories to rise and production and the level of employment after it is completed will be determined by the relationships between current production and purchasing power or, in more general terms, between the forces of expansion and those of contraction in the economic system...

...the probable change in productivity of hbsr is more difficult to measure...

...The floating temporary unemployment due to seasonal factors, industrial changes, occupational and geographic shifts of workers, and ths like, may amount to 2,500,000 persons in s prosperous year...

...It might rise to 60,000,-000...

...Current estimates of unemployment in the first Quarter of 1946 range from 2,000,000 to- 10,000,000, those for the first quarter of 1947 from 2,000,000 Is 20,000,000...

...How far should production and consumption increase in comparison with the prewar pattern to ensure full employment in the nation...

...This test shows how deceptive are the theoretical considerations and statistical procedures which underlie the pessimistic prophecies...

...The controversy whether we are heading toward depression or prosperity developed long before the surrender of Germany and Japan...

...In *et event, the total national product *»ald increaae approximately 30 percent ~asd this is the rise we need to enjoy '•U employment by the end of recon-trsion...

...Assuming that 1,500,000 surplus workers will still be in the lsbor market...

...If four out of every five consumers hold on to their sayings and only one spends, say, 10 percent of his liquid assets In 1946, the additional purchasing power would be more than $4,000,000,000...

...Both optimistic and pessi-Bj„tic estimates are usually qualified |y definite assumptions...

...ndepend...

...Quite the contrary—their demands for wage increases would appear more timely and appropriate in anticipation of an economic expansion than on the eve of a major depression...

...Purchasing Power Will Suffice to Stimulate Economy By W. S. Woytinsky OPINIONS on our chances of attaining full employment end prosperity in the near future are widely divided...

...It is less plausible when it is combined with the contention that workers had no share—or only a negligible share—in war savings...

...This is a natural result of a backlog of demand supported by the wartime savings of individuals and business enterprises...

...In these circumstances, shortage of labor appears more probable than mass unemployment—even if the Committee for Economic Development proves unable to deliver all the work opportunities it promises the nation...

...The shake-down takes the form of thousands of expensively produced pamphlets designed to throw a scare into the rich...

...pockets of unemployment, mark the transition to a peacetime economy...

...There is nothing to indicate t hut an average rise>1rf that rate would be extravagant or would require drastic chances in our pattern of life...

...Even if the work-week does not shrink M sharply as after 1918, the long-range used toward a shorter work-week and paid vacations will probably continue...

...Essentially, the present phase of our economic development appears not as the beginning of postwar depression but as the clear phase of postwar expansion, similar to the early 1920's...

...Boom times, rise of prices, and shortage of labor are characteristic of war economy...

...However, the demands of labor do not need to be supported by prophecies of gloom and high estimates of future unemployment...

...But it Is highly probe ble that it will serve its msin purpose, which is to fill ths coffers of the Commit tee for Constitutional Government...

...This does not mean that there is no danger of setbacks at an earlier stage 01 postwar economic developments: the p,rio<l of expansion, which is the logical •ftermath of the war economy, may be interrupted by economic difficulties «used by violent showdowns between |*hor and management, by a runaway •niUtioTt, by unfortunate measures in labor-market policy, or other contingencies...

...There is, however, no reason why we should return to this pattern...

...About 4,500,000 jobs would be in government—Federal, State, and local—and 50,000,000 jobs should be supplied by private economy...

...The conclusion is (inescapable: apart from unpre-dictsble dislocations, we will probably have in the coming years expanding production and s high genersl level of employment...

...This article is an attempt to approach the problem in a detached way, without regard to the merits of arguments for this or that theory, and to establish the probable economic trends in postwar America in the light of past experience, economic theory, and available statistical information...

...Add the coming boom in housing construction financed partly by bank credits...

...Most of the spokesmen for liberal causes are among the pessimists...

...It is fairly certain that in the coming years the forces of expansion will prevail and there will be a sellers' market for consumer and capital gdods, both here and abroad...